HKDSE BAFS Practice Paper: Financial Statements, Ratio Analysis And Costing (12 Questions, 100 Marks, 75 Minutes)

HKDSE BAFS Practice Paper: Financial Statements, Ratio Analysis and Costing (12 Questions, 100 Marks, 75 Minutes)

2026-11-04

HKDSE BAFS: Financial Statements, Ratio Analysis and Costing

HKDSE BAFS paper: 12 questions, 100 marks, 75 minutes, covering financial statements, accounting ratios, cost behaviour, bank reconciliation, depreciation and capital budgeting.

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Paper details　Level: S6 | Subject: BAFS | Time: 75 minutes | Marks: 100 | Questions: 12

Section A: Financial Statements and Ratio Analysis

Computation and preparation questions

#	Question	Answer and marking notes
1	A sole trader reports sales of 480,000, opening inventory 60,000, purchases 300,000, closing inventory 50,000 and operating expenses 96,000. Calculate (a) cost of goods sold; (b) gross profit; (c) net profit; (d) gross profit margin to one decimal place.	(a) Cost of goods sold = 60,000 + 300,000 – 50,000 = 310,000. (b) Gross profit = 480,000 – 310,000 = 170,000. (c) Net profit = 170,000 – 96,000 = 74,000. (d) Gross profit margin = 170,000 / 480,000 = 35.4%.
2	A company reports sales 600,000, cost of goods sold 450,000, net profit 48,000 and average inventory 75,000. Calculate the gross profit margin, the net profit margin and the inventory turnover ratio to one decimal place.	Gross profit margin = (600,000 – 450,000) / 600,000 = 25.0%; net profit margin = 48,000 / 600,000 = 8.0%; inventory turnover = 450,000 / 75,000 = 6.0 times.
3	A product sells for 80 with unit variable cost 48 and annual fixed costs 256,000. Calculate (a) unit contribution margin; (b) contribution margin ratio; (c) break-even units and break-even sales revenue; (d) units needed to earn a pre-tax profit of 96,000.	(a) Unit contribution = 80 – 48 = 32. (b) Contribution ratio = 32 / 80 = 40%. (c) Break-even units = 256,000 / 32 = 8,000 units; break-even sales = 8,000 x 80 = 640,000. (d) Required units = (256,000 + 96,000) / 32 = 11,000 units.
4	A job uses direct materials 42,000 and direct labour 28,000. Factory overhead is applied at 60% of direct labour cost and the job produces 200 units. Calculate (a) factory overhead; (b) total manufacturing cost; (c) unit cost.	(a) Overhead = 28,000 x 60% = 16,800. (b) Total cost = 42,000 + 28,000 + 16,800 = 86,800. (c) Unit cost = 86,800 / 200 = 434.

Section B: Bank Reconciliation, Bad Debts, Depreciation and Inventory

Accounting treatment and adjustment questions

#	Question	Answer and marking notes
5	A bank statement shows a credit balance of 52,300 at 31 December. Outstanding cheques are 8,600, deposits in transit are 4,900, a note collected by the bank of 3,000 is not yet recorded, and bank charges are 120. Prepare the reconciliation and find the book balance.	Adjusted bank balance = 52,300 + 4,900 – 8,600 = 48,600. Book balance = 48,600 + 120 – 3,000 = 45,720. Check: 45,720 + 3,000 – 120 = 48,600, so both sides agree.
6	Trade receivables are 360,000. The allowance for doubtful debts is 5% of receivables. The allowance brought forward is 6,500; bad debts written off are 4,200 and 1,500 of previously written-off debts are recovered. Calculate the pre-adjustment balance and the bad debt expense for the year.	Pre-adjustment balance = 6,500 – 4,200 + 1,500 = 3,800. Required allowance = 360,000 x 5% = 18,000. Bad debt expense = 18,000 – 3,800 = 14,200.
7	A machine costs 240,000, has an estimated residual value of 24,000 and a useful life of 5 years. Calculate (a) annual depreciation under the straight-line method; (b) depreciation for the first two years under the reducing-balance method at 25% of carrying amount; (c) the first-year difference between the two methods.	(a) (240,000 – 24,000) / 5 = 43,200. (b) Year 1: 240,000 x 25% = 60,000; Year 2: (240,000 – 60,000) x 25% = 45,000. (c) 60,000 – 43,200 = 16,800.
8	Inventory movements: opening 200 units at 30 each; purchases of 300 units at 34 each; a further 500 units at 38 each; 700 units sold during the year. Using the weighted average method, calculate the weighted average unit cost, cost of goods sold and closing inventory.	Goods available = 1,000 units at a total cost of 6,000 + 10,200 + 19,000 = 35,200. Weighted average cost = 35.2 per unit. Cost of goods sold = 700 x 35.2 = 24,640. Closing inventory = 300 x 35.2 = 10,560.

Section C: Partnerships, Companies and Capital Budgeting

Integrated analysis questions

#	Question	Answer and marking notes
9	Partners A and B have capital of 300,000 and 200,000. The agreement provides interest on capital at 8% a year, a salary of 60,000 to B, and equal sharing of the remaining profit. Profit for the year is 420,000. Calculate each partner share.	Interest on capital: A 24,000, B 16,000. Remaining profit = 420,000 – 24,000 – 16,000 – 60,000 = 320,000, shared 160,000 each. A receives 184,000; B receives 236,000.
10	A limited company has 400,000 ordinary shares and 100,000 6% preference shares, each with a par value of 1. Profit for the year is 180,000. The directors declare the full preference dividend and an ordinary dividend of 0.25 per share. Calculate the preference dividend, the ordinary dividend and the increase in retained earnings.	Preference dividend = 100,000 x 1 x 6% = 6,000. Ordinary dividend = 400,000 x 0.25 = 100,000. Increase in retained earnings = 180,000 – 6,000 – 100,000 = 74,000.
11	A project requires an initial outlay of 200,000 and generates net cash inflows of 70,000 a year for 4 years. The discount rate is 10%. Calculate (a) the annuity discount factor to four decimal places; (b) the net present value; (c) the payback period to two decimal places.	(a) Annuity factor = (1 – 1.1^-4) / 0.1 = 3.1699. (b) Present value = 70,000 x 3.1699 = 221,893.0; net present value = 221,893.0 – 200,000 = 21,893.0. (c) Payback = 200,000 / 70,000 = 2.86 years.
12	A company has current assets of 480,000, including inventory of 180,000, and current liabilities of 200,000. Calculate the current ratio and the quick ratio and explain the difference.	Current ratio = 480,000 / 200,000 = 2.4. Quick ratio = (480,000 – 180,000) / 200,000 = 1.5. The quick ratio excludes inventory and shows the ability to meet short-term debts immediately.

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